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“VALUE PROPOSITION”
…addressing customer outcomes
Andre’ Harrell
CEO/President AH2 & Beyond Consulting Whitepaper 2015
CONTENTS
Introduction .......................................................... 3
THE “VALUE PROPOSITION” ........................................... 3
The “Value” Debate ............................................... 5
Value Proposition (VP) Culture .......................... 7
Shared Responsibilities ................................................ 8
Building a “VP” culture ................................................ 8
Constructing the Value Proposition .............. 11
7-Step Value Proposition ............................................ 11
The Power of the Value Proposition ............... 16
Powerful Value Proposition Tips ................................. 17
Final Thoughts .................................................... 19
Selected Bibliography ....................................... 21
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Introduction The “VALUE PROPOSITION”
A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.1 The value proposition is basically marketing’s “internal affairs”, the checks and balances that hold the corporation accountable to promised customer value. Yet the “Value Prop” is probably the most misunderstood product framing strategy used today. A value proposition is a promise of value to be delivered and acknowledged, and a belief from the customer that value will be delivered and experienced. A value proposition can apply to an entire organization or parts thereof, customer accounts, or products and services.2 Building a value proposition to the chagrin of many takes a number of bricks which I’ll outline in this paper, however, the #1 objective of a value proposition is “Creating Customer Value” (CCV). While “CCV” has become just another sales & marketing buzz phrase it nonetheless is the competency of a value proposition. A competitive advantage for any corporation is creating a powerful value proposition that inspires the customer, and strengthens that relationship. Yes, I believe a well-crafted strategically implemented value proposition can catapult a product, service and company to the top of any market. Take for example APPLE the world’s probably most
1 INVESTOPEDIA 2 Wikipedia (Value Proposition)
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successful company and what they did to place “iTunes” at the top of digital music:
Apple is best known for their products' innovation and visual appeal. ITunes, the country's leading music retailer has sold over 25 billion songs to over 500 million users. The value proposition, found on iTunes.com, is great because it looks so clean and concise. The headline clearly expresses the product's competitive advantage and there is a clear call-to-action to move the visitor down the sales funnel. The visuals at the bottom put the icing on the creative cake.3
Figure 1 (dcu21digitalmarketing.wordpress.com)
3 Brett Casella (Impact Branding & Design June 26, 2013)
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Kantar Group a UK based market research company has claimed APPLE’s value proposition to be the best in the industry among PC’s. Carolina Milanesi, Chief of Research at Kantar Worldpanel ComTech states in her report that "As you would expect for a market that started in 2010 with the first generation iPad, tablet awareness among consumers is very high with only 4% of non-owners saying they have never heard of such a device." Apple has proven that they understand how to engage their customers by providing them with quality designed devices that perfectly blend with cutting edge applications and iCloud services. Apple's iTunes is still the industry's leading music platform and the App Store has no equal at the moment.
In the end it's about the value proposition stupid, and Apple is the company that understands that the best.
The “Value” Debate Most would say a marketer’s job is 3-fold to create, deliver, and capture customer value. The question that has elicited quite a debate is “What is value? Depending on whom you ask the answer I guarantee will vary, which allows for a lot of ambiguity. Louis J. De Rose, head of De Rose and Associates, Inc, defines value: “Value is the satisfaction of customer requirements at the lowest possible cost of acquisition, ownership, and use”. In a 1988 staff paper by Michael J. Lanning and Edward G. Michaels they define value from a different perspective: "A business is a value delivery system, that should emphasize in a clear, well-articulated "value proposition" for each targeted market segment—that is, a simple statement of the benefits that the company intends to provide to each segment, along with the approximate price the company will charge each segment for those benefits". Lanning holds that winning companies are those that develop a competitively
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superior value proposition and a superior value-delivery system. One of my favorite CEO’s from afar Jack Welch Chairman and CEO of General Electric between 1991 – 2001 posed the challenge to GE during his tenure: “The value decade is upon us. If you can’t sell a top quality product at the world’s lowest price, you’re going to be out of the game.” Many would probably differ with that view where top quality is perceived as having a top price. It’s that old adage “you pay for what you get. The fact is value ultimately depends on the perceiver…and receiver. The strategically smart companies not only offer cost value but they also offer service value (or extended customer value) as well. Say you purchase an expensive $60,000.00 vehicle you expect the dealer to provide excellent customer service when it comes to maintenance, repair and addressing your questions professionally. Drug companies who offer patient education materials or programs provide value-add resources that reinforce customer value. For most organizations a large part of their company’s expenditures is used to satisfy customers, and determining how to budget between value-adding costs and non-value-adding costs. Delta Airlines may consider offering free baggage check in for all passengers which would raise the cost of a flight by $30. Before enacting the policy, Delta Airlines would need to conduct voice of the customer research to gather whether customers would be willing to pay $20 extra per ticket for that service. If the answer is no, then the free baggage check is a non-value-adding cost. However, if Delta Airlines throws in free meal service for flights over 4 hours at $30 extra a ticket and travelers think it’s worth $40, then that would be a value-adding cost.
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Value Proposition (VP) Culture An organization’s foundation should be held in place by its value proposition. Let’s move to the side a product’s value proposition and focus on the company’s value proposition. If you were to survey each one of your employees what would they say about the company’s value proposition and how it addresses their needs? Is it free daycare? Free health club memberships? How does an organization “value” its value proposition internally as opposed to the external customer? When a company’s culture is built on a value proposition premise then it stands to reason that a boomerang effect of that behavior will touch the external customer. Building a “VP” culture encourages a “profit sharing” environment in that everyone feels they play a key role in the success of the company. A valued employee wants to be knowledgeable about company practices and how they can transition that knowledge to help customers have the best experience with their products or services. Companies benefit from having a “VP” culture because it encourages employees to execute better customer
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service and not feel it’s a job requirement but overall normal behavior in their work. Implementing a Shared Responsibilities Platform is one way a company can enforce but also encourage value is being executed every day:
Shared Responsibilities 1. We have a responsibility to our customers
We must put our customers first, provide superior advice, products and services, and always act with the highest level of integrity.
2. We have a responsibility to each other We must provide outstanding people the best opportunity to realize their potential. We must treat our teammates with respect, champion our diversity, share the responsibility for our successes, and accept accountability for our failures.
3. We have a responsibility to our department We must put department A’s long term interests ahead of each department’s short term gains, and provide superior results for our shareholders. We must respect the local culture and take an active role in the communities where we work and live.
Building a “VP” culture To ensure there’s unwavering focus on providing optimal value to the customer, a company has to have the same discipline and passion delivering value within its inner walls. Creating an organizational culture based on a “value proposition theme” is not an easy task. Obstacles like politics, heavy turnover, and poor leadership can get in the way and everyone ends up valuing only themselves. The old saying there’s no “I” in team had immense popularity in the 80’s & 90’s however the inspiration from that message has faded. Global competition and heavy unemployment has birthed a “survival of the fittest” personality in today’s business. Companies who are encouraged to find ways to inspire their employees and ultimately the customer have to do so operationally….not
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philosophically. The value proposition coming from a company and its products/services has to truly mean something, and not be perceived as corporate speak. Building a corporate culture that governs “value propositioning” internally takes 8 critical steps:
1. Building Interdependent Partnerships 2. Creating Value For Customer 3. Develop People For Peak Performance 4. Frame a Vision of the Future: Execute Strategically 5. Foster Business Growth 6. Demonstrate Positive Change 7. Lead By Example 8. Encourage Innovation and Endless Learning
It starts from the top! Company’s first must create a culture of trust and commitment to its employees well-being…yes well-being. These 8 steps require a level of commitment from EVERYBODY in an organization if it’s to be about providing a strong value proposition to the customer. For example “Developing People for Peak Performance” is a purposeful act a company can deliver that not only demonstrates a willingness to progress the competency of its workforce but shows the value it places on the person…not “employee”. Relying on the usual corporate values and credo just isn’t enough to inspire the employee to go beyond expectations. I always give the example of when I started my career out of college with Johnson & Johnson, Inc. and back then you actually believed in the “J&J Credo”…heck it inspired you:
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Figure 2 (Johnson & Johnson, Inc. Credo)
The new generation of employee requires a bit more energy from corporate leadership which involves a much more hands on approach. Measures that involve the 8 critical steps I’ve outlined above opens the doors to more collaboration, employee innovation input, and engagement. When a company lives by a common set of values that embrace the employee, then there’s a sense of empowerment to share that same embrace with the customer. A happy valued employee becomes the company’s best value proposition to its customers.
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Constructing the Value Proposition Building a winning value proposition should include 4 critical components: 1) Disrupt Market Satisfaction 2) Optimize Communication of Value Proposition 3) Generate Broad Product Demand 4) Ensure Positive Product Experience. All 4 components can provide a competitive edge when focused on the right audience the right number of times. Defining how your company is different has to be concise and appealing to the customer’s strongest decision-making drivers. Companies suffer greatly when customers either lose sight of a company’s value proposition or is no longer inspired by it. As mentioned while a winning value proposition has to have a “D.O.G.E” theme (e.g. Disrupt, Optimize Communication, Generate Demand, Ensure Positive Experience) the process to building a “VP” is very specific. Below outlines a 7-Step process to building a “D.O.G.E.” value proposition:
7-Step Value Proposition 1. Start with product core competencies 2. Know your customers 3. Competencies=Character 4. Research the competition 5. Look at trends in your industry 6. Articulate effectively product vision 7. VALIDATE THE VALUE
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Start with product core competencies • What are you really good at? • A value proposition has to be what you do and who you
are. It can’t just be what you want to be and what you say you are.
Know your customers
• Who are your top customers? • What problems do you solve for them? • What problems do they want solved?
(That no one else can fix) • Is there a new trend in any of your key customer
segments?
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TO DO:
Make a list of the following: what you brought to market first, what you offer as the only provider to the market, and what makes your offering clearly superior to any alternative. You are looking for what makes your product unique. These are good differentiators and will help the process.
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TO DO:
Build segmentation variables that include: • Identifying appropriate market channels to play in. • Identify customer characteristics/behaviors that
may explain likelihood to uncover need and advocate for a product/service
• Identify customer characteristics/behaviors that may explain early adoption or non-use.
• Identify market characteristics that may explain likelihood of product/service access and usage
• Build customer “Segmentation Variable Prioritization” matrix
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Competencies = Character
• Ask yourself why someone should buy from you instead of a competitor.
• Using the language of your customers, refine your core competencies as values.
• If your answer is “it works”, “it’s new” or “it’s less expensive” your potential success may be limited. These qualities do not make a product unique.
Research the Competition
• Choose 3 or 4 competitors and study how they market their company and products
• What is their value proposition? • Can they defend it? • Map their core competencies versus yours
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TO DO:
Conduct a “Voice of the Customer” (VOC) feedback mechanism that will describe customers’ needs and their perceptions of your product/service.
VOC data helps an organization: • Decide what products and services to offer. • Identify critical features and specifications for
those products/services. • Decide where to focus improvement efforts. • Get a baseline measure of customer satisfaction to
measure improvement against. • Identify key drivers of customer satisfaction.
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Market Trends
• Are things changing? • Can you take advantage of a trend and grab an exciting
position in the market? EXAMPLES – “Quality of Life” – “Cognitive Mobility” – “Excellent Safety Profile” – “Cost Benefit”
TO DO:
Complete a War Games Workshop/Session that: • Develop and/or capture relevant, potential core
messages the competition uses or is designing. • Build comprehensive list by grouping competitors’
messages to be used to compare/contrast against your product/services core message.
• Identify competitor functional benefits, practical benefits, and emotional benefits.
• Identify competitor brand communication strategy and personality traits. This will help build your messaging platforms to best highlight brand.
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TO DO:
Basic Market Research that is often broken down into 2 categories: Primary Market Research & Secondary Market Research.
• Primary market research is research that you can conduct on your own, rather than information already published. Conducting focus groups, customer surveys, and competition “Secret Shopping” are ways to implement primary market research.
• Secondary Market Research is research already published that may have relevancy to your business. Exposure to secondary research can be gained by contacting market research firms, Chambers of Commerce Government Information etc..
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Articulate Effectively Product Vision
• Product Leadership – Unique product profile – State-of-the-art features/benefits – Innovative solutions
• Customer Relationship – Quality relationships with customers – Offer “complete” solutions
• Refine your value proposition until you can articulate it in one sentence.
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TO DO:
Building the product/service “Vision” so that it’s easily communicated and comprehensible to the customer is critical. Several drafts should be completed with milestone reviews in between will help validate product “Vision”. The “Core Purpose” for articulating effectively the product/service “Vision”:
• Establishes your product/service fundamental reason for existence.
• Provides idealistic motives for your company and the products/services you promote.
• An opportunity to share with your customer base the “soul” of your product/service, not just pricing or surface attributes.
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Validate the “Value”
• Test the final value proposition with customers to see whether it resonates: EXAMPLES
– Key Opinion Focus Groups – Venue Customer Interviews – Mock Testing Meetings (KOL Driven) – Specialty Advisory Boards – Product In-service programs – Conventions-White Paper Discussion – Regulatory/Legal
The Power of the Value Proposition Inspiring a customer and converting them to “Loyalty” status can be directly tied to how powerful your value proposition garners. Understanding that customers are assets and, like valuable assets, if communicated properly too, can have a dramatic impact on business performance. Creating a strong value proposition that pinpoints customer demand/interest results in a competitive advantage for any organization. Companies can gain this advantage by building a value proposition that engages customers in a way that not only strengthens a particular product’s portfolio…but it also strengthens the relationship. If you are actively pursuing a customer-focused mission and asking, “Who is our customer”? Are we meeting their requirements and exceeding their expectations?—the leap to building a value
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TO DO:
A revisit of all 7-Steps is necessary to ensure the finished product of your “Value Proposition” is not only valid but is aligned to your corporate values.
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proposition that’s powerful is a positively optimistic goal. A powerful value proposition addresses questions like: “What will be our customers’ future needs? How can we meet them? What must we do to gain customer inspiration?
Powerful Value Proposition Tips • Examine everything you do well against these
criteria: “Does this message create sustainable value to the customer? or “Does this contribute to meeting customer demands?
• List the requirements you believe your have, then validate them by asking your customers what their requirements are.
• Develop an “SOP” for your products and services that consistently meet customer requirements. In addition, develop an “SOP” for customer service that exceeds customer expectations. An “SOP” itself can establish a value proposition that “Leads by Example.
• Conduct in-depth interviews with key customers to determine how they view your product, service and company…both strengths and weaknesses. What do they think the focus of your product, service and company should be in the year ahead. The results of the interviews can help construct your value proposition.
• Interview the customers who have stopped using your products or services. Find out their reasons for leaving as this may identify possible gaps in your current value proposition that can be addressed.
• Importantly, your value proposition has to be executed flawlessly so treat your internal customers (employees) with care and respect…customers will receive the fruits of that respect.
• Peek at your competition. Conduct a benchmarking research review of organizations that are known for their strong value propositions.
In a March 2006 publication in Harvard Business Review authors James C. Anderson, James A Narus and Walter Van Rossum had what I thought was a great point of view on
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building a strong value proposition that delivers superior business performance:
We contend that customer value propositions, properly constructed and delivered, make a significant contribution to business strategy and performance. GE Infrastructure Water & Process Technologies’ recent development of a new service offering to refinery customers illustrates how general manager John Panichella allocates limited resources to initiatives that will generate the greatest incremental value for his company and its customers. For example, a few years ago, a field rep had a creative idea for a new product, based on his comprehensive understanding of refinery processes and how refineries make money. The field rep submitted a new product introduction (NPI) request to the hydrocarbon industry marketing manager for further study. Field reps or anyone else in the organization can submit NPI requests whenever they have an inventive idea for a customer solution that they believe would have a large value impact but that GEIW&PT presently does not offer. Industry marketing managers, who have extensive industry expertise, then perform scoping studies to understand the potential of the proposed products to deliver significant value to segment customers. They create business cases for the proposed product, which are “racked and stacked” for review. The senior management team of GEIW&PT sort through a large number of potential initiatives competing for limited resources. The team approved Panichella’s initiative, which led to the development of a new offering that provided refinery customers with documented cost savings amounting to five to ten times the price they paid for the offering, thus realizing a compelling value proposition. 4
4 Harvard Business Review (Customer Value Propositions in Business Markets) March 2006
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GE for years has made customer value propositions a fundamental part of its business strategy. With laser beam focus GE has drawn on its best practices, and have built an approach to delivering customer value propositions that communicate, with resonating focus, the superior value their offerings provide to target market segments and customers.
Powerful customer value propositions can be a guiding lantern as well as the cornerstone for superior business performance. Thus, it is the responsibility of top management not just marketing management, to ensure that their customer value propositions are just that…powerful.
Final Thoughts There is a great payoff in building a strong value proposition which leads to a strong corporate brand. APPLE today can place its name on any portable electronic device and customers will stand in lines longer than the store itself…in the freezing cold. It has been said that if you’re alive, breathing, and walking you’ve sold something at least once in your life. Whether you’re trying to sell or persuade someone your point of view, it’s all selling and it’s important to have a solid value proposition supporting it. In the old days selling the features and benefits of your product/service was enough and customers usually made the decision whether or not those features/benefits addressed their needs. Today, there’s so much competition and parity with products and services that customers literally have a ton of choices within one category. For example, let’s look at bottled water what is the difference between Evian, Dasani, VOSS, and Fiji? Exactly, there’s very little difference however.in a 2014 FOX News report VOSS Artesian Water was noted as the #1 sold bottled water.
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Figure 3 (nkswingle.com/voss-product-photography/)
When researching why VOSS Artesian Water is popular among the water drinkers today it’s not ONLY because of the packaging (although a great marketing gimmick), it’s the messaging/value proposition behind the packaging. “VOSS” represents aristocracy, class and the perception of wealth. While these are superficial attributes of a brand it indeed provides a value proposition to the consumer who fits the “Esteem Needs” level on Maslow’s Hierarchy of Needs pyramid. A brand that has a creative and powerful value proposition that inspires and appeals to a consumer’s “hot button” can sell a $10 bottle of water over free clean tap water. To promote a product, service or company it’s no longer sufficient just providing a sound bite feature of your offering. Your message must focus closely on what your customers really want and value. Whatever you or your company is promoting a value proposition is useful, if not essential in ensuring you are differentiated in the marketplace. Moreover, whether your audience is external (customers), or internal (employees), the goal is to help them “experience” the specific value your proposition brings to them. In achieving this goal you will grab their attention in a way that says “Your product/service appeals to me more than anything else”.
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Selected Bibliography
Brett Casella (Impact Branding & Design June 26, 2013)
Harvard Business Review (Customer Value Propositions in Business Markets) March 2006
Investopedia
Wikipedia (Value Proposition)
Figure 1 (dcu21digitalmarketing.wordpress.com) ...................... 4 Figure 2 (Johnson & Johnson, Inc. Credo) ........................... 10 Figure 3 (nkswingle.com/voss-product-photography/) ................. 20
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